California’s “Surprise Medical Bill” Legislation Fails to Protect Patients

August 11, 2016
Area(s) of Interest: AB 72 Payor Issues and Reimbursement Out of Network Billing 

By Eileen Natuzzi, M.D., M.S., MPH, FACS

Californian patients are paying more for health care than ever before. Assemblyman Rob Bonta believes these increased costs are due to “surprise medical bills.” They are not.

While the Affordable Care Act (ACA) sought to reform health care costs, insurers have found a way to get around its mandates to raise premiums and deductible rates every year, while physician compensation has stagnated. In fact, it was announced last month that ACA health coverage will rise by an average of 13.2 percent in 2017 — more than three times the increase of the last two years.

According to a 2015 Consumers Union Report, a “surprise medical bill” is a bill where the insurer paid less than the patient expected. A lack of comprehensive data means no one really knows how many “surprise medical bills” are a case of sticker shock or what portion of them are from services provided by out-of-network doctors. Bonta’s proposed legislation to stop surprise billing, AB 72, is laudable in its intent, but it’s a distraction from the real problem patients face.

One of the primary culprits driving health care cost increases is that insurers have narrowed their provider networks so significantly over the past five years that it’s nearly impossible for patients to find a comprehensive complement of providers who work within their discounted network.

Some patients must drive hundreds of miles to maintain in-network savings, and when patients are forced outside of their network, they can up paying the price twice. That’s because patients already pay — up front — for projected out-of-network costs built into their premium calculation. On the back end, patients pay again when insurers shift out-of-network bills back to the patient.

Insurers seem unwilling to negotiate reasonable contracts with individual doctors. Without the ability to negotiate fair contracts, doctors are pushed out of the network and set their own rates based upon what they need to keep their practices solvent. Network contraction predictably follows. AB 72 would force all out-of-network doctors into a “de facto contract” without holding insurers accountable for narrow networks or patients’ increased costs.

Eliminating “surprise medical bills” is the Trojan horse of AB 72, and the insurers are banking on that. If the legislation is passed in its current form, mandated doctor rates will incentivize insurers to drive down all contracted rates. This will result in patient access and safety issues throughout the entire California health system.

No one wants to pay “surprise bills” for health care. It’s neither fair nor effective, and unfortunately, AB 72 doesn’t fix the root problem. AB 72 is a straw man that would allow insurers to avoid addressing the narrow provider networks, poor contracting practices and ongoing shifting of costs to patients so they can protect profits and shareholders.

Bottom line? AB 72 would allow insurer profits to erode the sacrosanct patient-physician relationship rather than hold predatory insurer practices accountable. The only way to end surprise billing is to create a system that incentivizes insurers to offer a full complement of in-house specialists rather than relying on a narrow offering of out-of-network doctors willing to provide care at a discount.


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